This research uses intraday trading data of listed firms on the Taiwan Stock Exchange to examine the prevalence of price manipulation. The empirical results exhibit significant seasonal effects in intraday returns that are consistent with performance inflation. The seasonality in return reversals is stronger at the turn of the year than at other quarters, suggesting performance inflation is more abundant at the end of the year than at other times. High-risk stocks exhibit more pronounced year-end performance inflation compared with other stocks. Equity mutual funds engaging in substantial window dressing demonstrate conspicuous portfolio return reversals. Session-ending and session-beginning order imbalances by foreign investors and investment trusts closely correlate to the magnitude of return reversals. Lastly, investment trusts display the most pronounced year-end performance inflation compared to other investors, while individual investors may lack the incentive or ability to artificially boost their portfolios.
Financial inclusion (FI) is an important tool in creating economic growth and reducing poverty for social equity regardless of country’s development. This study examines the effects of Mobile and Internet Banking (MIB) and Digital Payment Systems (DPS) on financial inclusion in diverse economic environments. Additionally, it examines whether the SES plays any roles as a moderator on the relationships between digital financial services and financial inclusion. Using a panel of 63 countries in a cross-sectional database which is divided according to overall country grouping, state of development, income level and Human Development Index (HDI), four separate samples are analysed utilizing multiple regression and Feasible Generalized Least Squares (FGLS) technique. The findings of research are all consistently profound and positive in the impact of DPS on FI irrespective of country category or model, reemphasizing its wide applicability to financial inclusion. On the other hand, the impact of MIB is less effective or even counterproductive, particularly in countries with high income and HDI countries where there is a small share of conventional banking services exist. In certain models, SES has a moderating effect indicating a context sensitive relationship from SES to the role of digital tools on financial access.
Motivated by the recent theoretical rehabilitation of mean-variance optimization (MVO) and the new insight that, for many return distributions, its efficient sets are asymptotically equivalent to the ones of more general mean-risk optimization (MRO), we investigate how both frameworks compare in a practically relevant narrow sample situation where estimation error may result in quite different portfolios. Specifically, using the historical constituents of the Dow Jones Industrial Average, we construct optimal stock portfolios based on various risk measures and evaluate their out-of-sample returns by means of a suitable economic performance measure. We find no statistically significant differences in the financial performance of MVO and MRO suggesting that, from a practical perspective, there is no need to abandon MVO in favor of popular MRO alternatives.
This study examines whether financial inclusion strategies in faith-based charity organisations are shaped primarily by executive dispositions or by governance authority structures. Drawing on upper echelons and agency theories, it develops an integrated framework explaining variation in the formalisation of resource redistribution through banking channels. Financial inclusion is viewed as a strategic mechanism through which organisations facilitate participation in the formal financial system by connecting beneficiaries to regulated financial institutions. The evidence shows that leadership characteristics exert a systematic influence on the adoption of such strategies. Specifically, organisations led by female, altruistic, and younger chief executives are significantly more likely to channel resources through formal financial institutions, whereas governance arrangements that concentrate managerial authority are associated with lower levels of strategic formalisation. Additional analyses indicate that the influence of female leadership is amplified in the presence of larger and more gender-diverse boards. Collectively, the results suggest that financial inclusion strategies are driven more strongly by executive values and cognitive orientations than by governance-based authority alone. The study contributes to the literature on leadership, governance, financial inclusion, and the third sector by demonstrating that executive characteristics represent a critical organisational mechanism through which broader participation in formal financial systems is achieved.
We examine whether stock returns in Germany are related to Google search volume originating from firms' headquarter states. In detail, we study whether headquarter-state Google search volume, search volume concentration across states, and search interest from Hesse state, which is home to Frankfurt, are related to and help predict excess returns, absolute excess returns, and price variation. We also test whether the effect of local bias or search concentration on excess returns differs across positive and negative excess return periods. We find that headquarter-state search volume is positively associated with contemporaneous excess returns for large-cap (DAX) stocks; for mid-cap (MDAX) stocks, the relationship is delayed, while for small-cap (SDAX) stocks and the combined sample, there is no such link. Search concentration across states is likewise positively associated with the excess returns of large-cap stocks, suggesting that geographically concentrated attention itself carries return-relevant information. Together, these results suggest that investors may hold a local information advantage regarding large-cap stocks, though this advantage may extend beyond the firm’s headquarters. Besides, intensified searches from Hesse state can sometimes be associated with higher absolute excess returns in small-cap stocks, showing investors located in the financial center might have an information advantage. Moreover, during positive (negative) excess return periods, search concentration is associated with lower (higher) excess returns, implying either an information advantage or contrarian behavior. Our results are also supported by robustness checks on subsamples sorted by liquidity and analyst coverage. These findings have implications for market efficiency and investor behavior.
We develop a multistep GVAR causality framework to identify sequential causal linkages in highly interconnected financial systems. Building on the concept of stepwise / multistep causality, and the Global Vector Autoregressive (GVAR) framework, the proposed approach establishes the testing strategy and assess its finite-sample performance through Monte Carlo (MC) simulations. We apply the methodology to a panel of European Union (EU) economies in order to trace shock transmission between traditional banking and shadow banking sectors. The results reveal strong propagation. Shadow banking is tightly connected to the official banking system, while shocks do not remain confined within individual national financial systems but spread through the European financial network. The Italian shadow banking sector emerges as a particularly important transmission node, exerting statistically significant influence on the Eurozone and EU economies. These findings suggest that shadow banking constitutes a relevant channel of systemic risk and financial contagion in Europe. From a policy perspective, the results support the need for stronger macroprudential monitoring of non-bank financial intermediation and closer regulatory attention.
This study provides a comprehensive overview of momentum strategies, with an emphasis on integrating both technical and fundamental analysis. It reviews major forms of momentum strategies, including time-series momentum and cross-sectional momentum, and synthesizes empirical evidence on their performance across a wide range of financial markets. The sources of the momentum effect, encompassing both efficient and behavioral explanations, are also discussed. Overall, the literature indicates that momentum strategies remain a widely adopted and economically significant for many market participants. This study concludes by highlighting potential directions for future research on momentum and its underlying mechanisms.
This paper presents a comprehensive review of the rapidly expanding literature on environmental, social, and governance (ESG) issues. In this survey, we highlight recent advances in both theoretical modeling and empirical analysis. We first review major theoretical ESG models. Following this, we survey empirical research in six key areas: (1) climate risk and insurance, (2) regulation and policy, (3) ESG in the asset management industry and SRI, (4) investment, consumption, and employment, (5) ESG disclosure and assurance, and (6) firm valuation: profitability, cost of capital, and asset pricing. While significant progress has been made in understanding the impact of ESG factors on firm behavior and market outcomes, we find important gaps remain and suggest future research directions.
This article studies the tail behavior of stock returns as a result of the interplay between a firm’s innovation search strategy and the environment in which the firm operates. Using a sample of 848 innovation-intensive firms trading in 13 countries over the 1995–2019 period, we provide evidence of time-varying exploration–exploitation choices by the sample firms. Our main analysis reveals that exploration-focused firms are more prone to stock price crash risk, but these firms are also more likely to experience large right tails. In addition, the positive relation between exploration and extreme changes in stock prices in either direction is non-linear (inverted U-shaped) in the intensity of competition in the external environment of the firm. Interestingly, ambidexterity appears to play an insulation role against crash risk, but the insulation effect only prevails in concentrated market settings and among financially constrained firms, which makes of ambidexterity a ‘hedge’ innovation search strategy when compared with one-sided exploration or one-sided exploitation. Furthermore, while we corroborate the evidence in prior studies that exploitation-oriented firms are undervalued, we add that the risk-adjusted returns and the exploration–exploitation choices share a complex non-monotonic relationship. Finally, we document that long-term orientation and uncertainty avoidance shape investor perceptions of stock price crash risk. Collectively, our results have important implications for investor portfolio choice and the financing of innovation.
The present study investigates the link between CEO political connections and regulatory bank reprimands in China. We identify a resilient inverse relation. We explore this relationship in terms of a Chinese bank’s (1) ownership characteristics, (2) risk-taking behavior, and (3) board attributes. The non-criminal enforcements we consider occur with considerable frequency and usually serve as reprimands. However, the visibility of such reprimands suggests significant risk of reputational loss for politically connected bank leaders. Study findings indicate a strong inverse association between such enforcements and a CEO’s state-level political connections. This relation weakened following China’s 2013 anti-graft reforms. We also report lower reprimand rates in banks with female board members. Likewise, lower rates are apparent in banks combining CEO political connections with concentrated ownership. However, such positive effects principally relate to non-SOE banks.
We examine how bank concentration affects corporate cash holdings through firms’ access to external financing. Using a panel of U.S. public firms from 1994 to 2017, we show that higher bank concentration reduces firms’ access to bank credit, leading to higher precautionary cash holdings. Employing a structural equation modeling approach, we document a significant mediation effect of credit access, consistent with the bank market power hypothesis. The effect strengthens following the Gramm–Leach–Bliley Act, suggesting that changes in the banking structure amplify the transmission of financial constraints to corporate liquidity policies. Cross-sectional evidence indicates that the effect is more pronounced among financially constrained, non-NYSE, and high-intangible firms. Our findings highlight a key channel through which banking market structure influences corporate financial policies, linking bank concentration to firms’ liquidity management via credit supply conditions.
We examine the borrowing costs of dual-class firms from a life-cycle perspective. Using a sample of U.S. listed firms, we find that dual-class firms face significantly higher loan spreads than single-class firms only during the growth stage, with no meaningful differences in the introduction or maturity stages. This result is robust to a range of tests addressing self-selection, simultaneity, and omitted variable concerns. We interpret this pattern through the hold-up theory of relationship lending: bank-dependent dual-class firms exhibit a hump-shaped borrowing cost profile over the life cycle, with spreads peaking in the growth stage when banks exploit informational advantages. Our findings indicate that the cost of dual-class ownership is inherently dynamic and operates through debt financing channels.
Using a dataset of Chinese mutual funds and public firms from 2009 to 2023, we provide robust empirical evidence that firms with higher fund insider ownership—defined as shares held by fund insiders through the funds they manage—exhibit greater future stock price crash risk. Channel tests reveal that individual investors and fund peers interpret fund insider ownership as a positive signal of firms’ future stock market performance, fueling heightened investor optimism and mutual fund herding behavior toward firms with high fund insider ownership. Moreover, such firms are found to engage in more aggressive accrual-based earnings management and exhibit a higher propensity for financial restatements, consistent with the argument that fund insider ownership intensifies their pressure to suppress negative news. Cross-sectional analysis reveals that this effect is more pronounced in firms with weaker stock market performance, higher analyst coverage, or less information disclosure. Furthermore, the effect is attenuated when trading directions diverge between funds with and without insider holdings within the same fund family. Our study suggests that fund insider ownership, designed to mitigate agency conflicts between fund investors and insiders, may inadvertently destabilize the stock market.
We examine the effect of reputation loss on corporate financial management. We measure reputation loss by considering negative media coverage. Harmful news damages firm reputation, increasing operational risk. We predict managers to respond to this increased risk by buffering precautionary cash savings, lowering financial leverage, and substituting long for short term debt. Results show that an increase in negative press coverage increases cash holdings in the subsequent quarter by 4.12
This paper investigates whether and how institutional investor distraction affects debt concentration using a sample of 25,434 firm-year observations for Chinese non-financial listed firms over the 2007–2021 period. Consistent with our hypothesis, we document robust evidence of a positive relation between institutional investor distraction and debt concentration, even after controlling for a wide range of firm characteristics. Further analysis suggests that the positive relation between institutional investor distraction and debt concentration is more pronounced for firms with weak external monitoring or less effective internal governance, and for firms with greater coordination concerns. Taken together, our study highlights the importance of institutional investor monitoring in shaping corporate debt structure.
This paper studies independent directors’ advisory and monitoring functions on audit quality by employing a unique institutional setting in Taiwan where the firms begin to appoint independent directors but have not set up an audit committee. Using the staggered difference-in-differences approach, we find that after a firm appoints independent directors, the firm is more likely to hire industry-expertise auditors (advisory function) and decrease the firm’s related party transactions (monitoring function), which further causes an improvement in audit quality. Our further analyses show that the improvement of audit quality is more pronounced in an environment with weaker regulation or exists in unlisted firms, suggesting that independent directors are useful in substituting external governance and mitigating information asymmetry. Last, we also find that the audit quality will further improve after a firm sets up an audit committee, and this improvement is additional to the existing effect of independent directors.
This study examines the CEO incentives to join the S P 500 Index member club by managing the reported earnings. Based on a sample of 583 index additions from 1989 to 2022, we document a significantly positive abnormal return from the announcement to the effective date, and a slight reversal in the long-term post-inclusion performance. Similarly, operating performance flourishes prior to inclusion but deteriorates post-inclusion. These phenomena are consistent with earnings management hypothesis. We further examine the accrual-based and real earnings management measures of additions and find that some of additions may engage in boosting the reported earnings. Finally, we explore the CEO incentives by examining the abnormal CEO compensation around the Index inclusion. We document a positive association between earnings management and abnormal CEO compensation, particularly abnormal equity-based compensation. Overall, the evidences are consistent with the view that CEO has incentive to boost the reported earnings to join the S P 500 Index, in an attempt to increase their compensation.
This study examines the relationship between institutional cross-ownership and ESG decoupling. Based on a dataset of 3,955 firm-year observations for S P 500 firms for the period 2010–2022, we find a negatively significant association between institutional cross-ownership and ESG decoupling. Additional analyses on institutional cross-owner characteristics reveal that our findings are driven mainly by institutional cross-owners with long-term investment horizons. Besides, subsample analyses reveal that the negative impact manifests more in companies with lower board co-option, shorter CEO career horizon, and those that are non-controversial. Furthermore, we document that both the monitoring and financing advantages channels explain institutional cross-ownership’s negative influence on ESG decoupling. The baseline results are robust to a battery of robustness checks and endogeneity tests. Collectively, this study provides insightful theoretical and policy implications for the field of institutional ownership and ESG.
Previous studies have suggested that the gender of fund managers and directors might have an impact on investment decisions and fund performance, and this idea has also been verified in Real Estate Investment Trusts (REITs). A possible explanation is that female and male managers may differ in their decision-making styles. This study examines how board gender diversity relates to firm performance, with particular attention to the COVID-19 pandemic. Using panel data on 112 U.S. REITs from 2017 to 2022, we investigate the relationship between board gender composition and REIT performance before and during/after the COVID-19 period. This study first applies the Fama–French multi-factor models to estimate firm-level excess returns. Then, a difference-in-differences (DID) model is used to examine whether REITs with higher female board representation prior to COVID experienced differential performance during and after the pandemic. The results reveal a significant and positive relationship between board gender diversity and U.S. REIT performance during/after COVID, supporting the main hypothesis.
This paper introduces a novel, relative liquidity measure, derived from the post-trade impact of observable market events, such as trades and orders. This is used to identify what level (threshold) of trading intensity is considered high, relative to prevailing market conditions. This is then used to investigate the reaction of algorithmic trading in the EU ETS to liquidity signals. The level of trading intensity (threshold) above which we observe more algorithmic trading is reversely proportional to trading activity, suggesting that algorithms become more “reactive” in more active market conditions. However, this threshold is elevated significantly after the introduction of the pre- and post-trade transparency requirements imposed by the MiFID II rules, implying that algorithms become systematically less “reactive” overall. This suggests that the major issue in carbon pricing in the EU ETS is not liquidity per se, but how it is related to signal clarity and, ultimately, to information diffusion.
